I live and work in Irvine, California, which many consider to be ground zero for Chinese new home investment in the United States. In addition to everything else great about living in America, Irvine has fantastic schools, many new homes (Chinese have a huge preference for new over resale), a very well established Chinese culture, and is within one hour of Los Angeles International Airport. Some of the new home communities we have worked on in Irvine have sold more than half of their homes to Chinese buyers, and I am being conservative here. Prices often exceed $1 million, and frequently there is no mortgage.
Chinese interest in US housing is not confined to California, as our consulting team has noticed Chinese home buying in areas served by all of the major airport hubs. In South Florida, agents have been flying directly to China to compensate for declining demand from South America.
While the recent Chinese stock market correction has caused a decline in sales (one of my builder clients has noticed a sharp pullback, another just told me about a home sale cancellation specifically due to the buyer’s stock market losses, and one publicly traded home builder even mentioned the pullback on their earnings call.), our research has convinced us of tremendous Chinese demand to buy US real estate for their families and as investments.
Nonetheless, we remain very uncertain about the level of future Chinese home buying:
1. Is the number of people who can no longer afford to purchase a home after the stock market correction and currency devaluation greater or less than the number of people who will be encouraged to buy here by the stock market and currency instability?
3. Will the government lift the $50,000 annual overseas investment cap later this year as anticipated, which could cause a flood of Chinese investment in US housing?
We don’t know the answer to any of these questions, but the future success of many new home communities depends on the answer. If you have some particular insight based on your knowledge of China, please let us know. We are constantly in search of new and better information.
Rob Hahn discusses his thoughts about the future of real estate agents after reading this in the Zillow 2Q/2015 Earning Call:
For example, at the end of Q2, the number of agents spending more than $5,000 per month, grew 48% year-over-year. Agents spending over $2,500 per month, grew 44% year-over-year. And the number of agents spending over $1,000 per month grew 34% year-over-year. The churn rate among these cohorts is very low, validating our strategy of focusing on high performing agents.
The two best attempts of creating an agent-ranking website got shot down by realtors themselves. But outside entrepreneurs keep plugging away, and one of them could find the right mix and hit the jackpot some day.
One website called homelight.com has agent data. To see what they presented, I looked up my own name. They don’t go into details of where they found this data, or how to interpret this data. No time periods are given either:
Realtors complained about accuracy, but this is what we get instead – outsiders who are running an agent-referral business and using our names and numbers for eyeball bait. They hope you’ll inquire about an agent, submit your contact info, and then they will send you two other agents who are paying them a referral fee of 25% to 30%.
I don’t know where this company gets their data. I’ve sold around 32 homes within the city limits of San Diego, but did they get that straight from the MLS? A title company?
The average days-on-market should only be for listings sold – unless a longer average means the agent’s buyers are waiting out the sellers more effectively. On the MLS, my average days-on-market with sellers is 29 days, and buyer sales average 50 days so I don’t know where they got the 64.
Who knows about the 177. I have more than that on my Zillow count but they may have taken their number from a few years ago? BTW, Zillow finally corrected their sales counts. Each agent has their sales tally on their Zillow page, but Zillow’s 12-month timer must have broke because recently they had displayed my count for the last 17-18 months. I doubt any agents complained! It is back to the 12-month count now.
Two broker-generated listing portals are being developed currently, and they should include agent statistics right off their MLS. They will have the accurate data at their fingertips, so let’s create a depository of identical stats on each agent so the public can educate themselves.
Would it favor the old veterans who have more stats?
It might impress the analytical people who crave data, but consumers should be willing to consider the whole package. If photos and video were included in each agent page, any realtor could create a compelling case on why people should use them.
If agents don’t develop our own website, others like Zillow will keep doing it for us. Or we’ll leave it the way it is now, with agents being able to say whatever they want about themselves because there’s no public way to verify.
Recently an agent mailed out a fancy brochure about being a rural-property specialist. But a simple MLS search of her sales revealed that she had never sold a rural property. She said she had 15 years experience, but she got her license four years ago. I guess she could have been an assistant, or sold in another state, but if you haven’t sold one here yourself in the last four years, then you aren’t a specialist. Yet many agents get away with it because there’s no transparency.
Let’s provide a simple and identical set of data on every agent, and give explanations on how to interpret them.
These are my 16 listings sold over the last 12 months:
Possible interpretations by consumers:
1. He only sold 16 listings in the last 12 months?
The blog drove a lot of buyers my way during the downturn, and I’ve been scrambling to generate organic listings since the REO listings dried up.
2. He sells them too fast.
Sellers who think it should take months to sell a house will think I’m giving them away. But it is more a reflection of pricing accuracy and a hot market.
3. He doesn’t work my price range.
4. He doesn’t work my area.
5. He doesn’t sell my size of house.
6. He’s too busy. (I’ve sold twice this many)
7. He’s not busy enough.
8. He only works with sellers (I closed 17 buyer sales).
If each agent inputted their own explanations, they could add texture to their stats, and make their case why they should be hired. Include a video presentation too (Zillow does).
Consumers would be making educated decisions, and we as agents should not only applaud that, we should insist on it. Agents would have to get better at selling themselves, and those that do would get the business, regardless of experience or sales history.
I am uncomfortable displaying my stats – people are prone to poke holes and find faults. It’s why realtors don’t want data released! But we should all get used to our sales histories being public, because one way or another it is happening – with or without us. Let’s make the best of it!
Over the next 15 years, Bell traveled all over the world, dividing his time between massive disasters and lurid scenes of tabloid horror. He examined such famously stigmatized properties as JonBenét Ramsey’s house, the Lower Ninth Ward of New Orleans, the nuclear-weapons test sites of the Bikini Atoll, businesses looted and burned in the Rodney King riots, the California estate where actress Sharon Tate was killed by followers of the Manson family, Chernobyl, the Rancho Santa Fe mansion where 39 members of the Heaven’s Gate cult committed suicide, the field in Pennsylvania where United flight 93 crashed, and the World Trade Center. For around $400 per hour, Bell would advise sellers on how to price their stigmatized property or make it more attractive to prospective buyers.
To determine an event’s effect on property value, Bell takes the price of a comparable, unstigmatized property and, using case studies drawn from his own research, calculates a percentage of depreciation. The exact percentage depends on the severity of the stigma, the elasticity of the local real estate market, and a host of other factors that can intensify or diminish the impact. Suicides, according to Bell, create less stigma than murders, but both create more than sexual assaults. Unsolved crimes create more stigma than those for which a suspect is apprehended. A murder that happens indoors creates more stigma than a murder that occurs outdoors. A murder involving a child is especially bad. Widely reported crimes create dramatically more stigma than those that are ignored. Peaceful deaths and nonviolent crimes carry little to no stigma. Murders in low-crime neighborhoods tend to attract more stigma than murders in high-crime areas.
On average, most stigmatized properties, Bell estimates, sell at a discount of between 15 percent and 25 percent and take significantly longer to find a buyer.
Bell says, though, that even the worst stigma eventually fades. A house is usually unsellable immediately after a crime. But within three to seven years, most properties recover nearly all their value. Forgotten violence loses its power to haunt.
“The financial penalty Mrs. Milliken has suffered was entirely avoidable had the sellers from whom she bought her home merely exercised a little more integrity and a little less greed.”
This cnbc.com article talks about how ‘crazy’ rents have become, which isn’t exactly a scientific term but rents do appear to be on the rise. But the indented paragraph below shows how low rates and big down payments have helped buyers lower their monthly ‘nut’ compared to the last boom:
In some areas, rent is even more unaffordable. In Los Angeles, California, renters sent nearly 50 percent of their income to the landlord in the second quarter, while in the New York-Northern New Jersey and the Miami-Fort Lauderdale, Florida areas, that was hovering around 41-45 percent, the survey from the real estate listing and analytics company found.
Rents and occupancies are currently hovering at historic highs. While apartment construction has seen strong growth over the past three years, construction of multifamily homes, such as apartment buildings, fell to next to nothing amid the housing bust and the new units are meeting with pent-up demand.
Buyers, however, appear to be sitting pretty, likely spending around 15.1 percent of their monthly income on mortgage payments, down from around 21.3 percent in the 1985-2000 period, the study found.
“If you can possibly come up with a down payment, then it’s a good time to buy a home and start putting your money toward a mortgage,” Gudell said.
Early last month we had that little blip in new listings that I thought could mean something, but the New Actives and New Pendings counts sure have settled down since:
We were on about the same pace last year at this time!
Click on the link below for the complete NSDCC active-inventory data:
Here’s the best reason to fix and clean your house before selling.
It is irresistible for buyers to add up what they think needs to be fixed, and subtract it from your price. I-R-R-E-S-I-S-T-I-B-L-E.
Some make a sport of it, with both husband and wife scurrying around to see who can find the biggest flaws – and then attach an approximate cost to fix.
But their number is usually double the actual cost, because they aren’t that familiar with the costs, plus they add extra for the hassle factor too.
If a seller is going to get dinged for the damages anyway, they might as well fix them in advance to help the chances of selling for top dollar.
“Can’t we lower the price instead?”
Buyers don’t want to give sellers any credit for pricing in the condition of the home. If it needs work, they want a break on the price. They want to deduct their cost expectations from whatever the list price is, and then double-ding you again once they complete their home inspection.
This didn’t matter as much during the frenzy. But from here on out, we will be experiencing less-than-frenzy conditions.
P.S. I was serious about removing half of the contents. Most houses are full of the sellers’ valued possessions, but they look like junk to everyone else.
JtR, have your sales and experience led you to a percentage of listing price that should be devoted to making deferred maintenance and aesthetic updates? Perhaps a suggested metric other than percentage of LP?
To wit, I’m sure there are some listing agents who would love for their clients to dump as much cash into the front end as they can. No skin off the agents’ backs, right?
Hypothetical: If a CMA led to a listing price of 800K, would you advise your client to invest 8K, 16K, 24K toward making it truly marketable?
Am assuming paint and flooring, kitchen and master bath updating if needed, but there has to be a point of diminishing returns. I mean, there are “cream puffs” and there are “cream puffs”…
Any general guidelines you’d care to share would be appreciated.
General guideline: Make the house look and smell clean. Add new carpet and paint, do a thorough cleaning, and remove all clutter and half the contents. Include staging to provide emotional appeal and make it memorable.
Let’s go back to his paragraph two.
Not that anyone reads the contracts (principals or agents), but our listing agreement encourages sellers to consider all offers. But once the home is on the market, sellers tend to dig in on price. Their family, friends, and neighbors have seen the price, and sellers feel the need to defend it – at all costs.
It’s not necessarily a conscious thing – it is human nature….in this society.
It is miraculous that buyers are willing to satisfy the sellers’ demands approximately 3,000 times every month in San Diego County (3,568 detached and attached-home sales last month).
Agents hope that trend continues and are willing to list a home for sale at no cost to the seller. Yes, we can score a big bounty at the very end if we can get buyers and sellers to the finish line. But we do so without having a vote on the eventual sales price.
From Paragraph 7 in our listing agreement: “Seller is responsible for determining at what price to list and sell the Property.”
It happens regularly that a listing agent will spend weeks, months, and sometimes years trying to sell a house. They may procure several offers, which would seem to indicate what the market will bear. But the seller has no obligation unless a full-price offer is produced.
To tie it back to 3rd Gen’s question – Because every seller wants to sell for the top of the range of what homes are selling for in the neighborhood, agents are smart to tell them to buff it out before listing.
If sellers were willing – and committed – to sell for what the market will bear, then we could throw a house on the market in any condition and see what it’s worth.
But most sellers won’t sell for any price – they want to sell for their price, regardless of what the market will bear. Thus, fixing them up improves everyone’s chances of a successful sale. You’ve seen me personally get involved in the improvements too – I know it helps our chances!
If we could all understand and agree that a house will sell for what the market will bear, it would change everything. But instead, sellers are motivated to hire the agent that quotes them the highest price, regardless of condition. Some do the fix-ups, and some don’t, and then buyers are left to figure out the rest.
Another reason why realtors should be proponents of auctions!
